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���������ֳ�’s Sector Outlook: Stable ���������ֳ� expects an economic recovery in Latin America in 2021 after a sharp contraction in 2020. However, the strength of the recovery will vary across countries and the risks are tilted to the downside. The emergence of negative output gaps means that inflationary pressures will remain manageable in 2021 despite the expected domestic demand recovery. ���������ֳ� believes that fiscal consolidation, while paramount after the sharp deterioration in 2020, will face challenges from uneven economic (and revenue) recoveries, continued spending pressures, and possible political/social tensions. Adequate external liquidity, higher commodity prices, an accommodative global monetary policy backdrop and the external adjustment seen in 2020 should help most countries ward off serious balance of payments pressures in 2021. Rating Outlook: Negative Nearly half of the Latin American sovereign ratings are on Negative Outlook, which indicates that there is significant scope for downward rating actions in 2021. Nine sovereigns are on Negative Outlook compared with seven at end-2019. This is despite several rating downgrades during this year. In 2020, Argentina, Ecuador and Suriname defaulted on their debt. Besides these countries, ���������ֳ� downgraded seven countries (Aruba, Bolivia, Chile, Colombia, Costa Rica, Guatemala and Mexico). Peru’s Local-Currency Issuer Default Rating (IDR) was also downgraded and aligned with the Foreign-Currency IDR. No countries are on Positive Outlook.